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EXHIBIT 2(ii)
LIMITED LIABILITY INTEREST PURCHASE AGREEMENT
THIS LIMITED LIABILITY INTEREST PURCHASE AGREEMENT is made and entered
into as of the ____ day of ______________ 2000, by and among Xxxxxxx X. Xxxxxxx
an individual and resident of the State of Colorado ("Xxxxxxx") and Xxxxxxx X.
Xxxx, an individual and resident of the State of Colorado ("Xxxx") (Xxxxxxx and
Xxxx are sometimes collectively referred to as "Sellers"), IntelliReady, Inc., a
Colorado corporation (hereinafter referred to as the "Buyer" or as
"IntelliReady"). The Buyer and the Sellers are hereinafter collectively referred
to as the "Parties" or individually as a "Party".
WITNESSETH:
A. Sellers are the owners of all of the issued and outstanding Limited Liability
Interest of Time Direct, LLC ("TDL") a Colorado limited liability company ("TDL
Interest");
B. At Closing, Buyer will own all of the issued and outstanding TDL Interest
free of any claim or right of any other party, entity or person ("TDL
Interest");
C. TDL is taxed as partnership and has been for all tax years since its
formation; and
D. The Buyer has agreed to purchase from the Sellers, and the Sellers have
agreed to sell to the Buyer, all of the issued and outstanding TDL Interest upon
the terms and subject to the conditions hereof.
NOW, THEREFORE, for and in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties
and covenants herein contained, the Parties agree as follows:
SECTION 1. DEFINITIONS. As used herein, the following terms will have the
meanings ascribed thereto in this Section 1:
(a) "Accident and Health Liabilities" means any and all liability
reflected on the Closing Balance Sheet with respect to the TDL Employee
Healthcare Plan.
(b) "Accounts Receivable" means TDL's accounts receivable determined
from the books of account of TDL less TDL 's reserve for uncollectible accounts,
if any, as shown on the most recent TDL Balance Sheet as of March 31, 2000 and
as shown on the Closing Balance Sheet.
(c) "Buyer" has the meaning set forth in the preface above.
(d) "Closing" has the meaning set forth in Section 2(d) below.
(e) "Closing Balance Sheet" shall refer to the TDS Balance Sheet as of
the end of the month just prior to Closing.
(f) "Closing Date" has the meaning set forth in Section 2(d) below.
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(g) "Code" means the Internal Revenue Code of 1986, as amended.
(h) "Confidential Information" means any information pertaining to the
business, operations, marketing, customers, financing, forecasts and plans
concerning any of the Parties and includes this Limited Liability Interest
Purchase Agreement. Information shall be treated as Confidential Information
whenever such information has been marked "confidential" or in a similar manner.
(i) "Covenant Not to Compete" shall have the meaning set forth in
Section 2(b).
(j) "Customer" shall refer to those entities who are Customers of TDL
as set forth on Exhibit A as further defined in Section 6(dd). Generally,
"Customer" refers to an entity from whom TDL has agreed to provide home
automation services in connection with the TDL Business.
(k) "Disclosure Schedule" has the meaning set forth in Section 6
hereof.
(l) "Employee Benefit Plan" means any: (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan; (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan; (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan; or (d)
Employee Welfare Benefit Plan or material fringe benefit plan or program.
(m) "Employee Pension Benefit Plan" has the meaning set forth in ERISA
Section 3(2).
(n) "Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Section 3(1).
(o) "Environmental Law or Laws" means any and all federal, state, local
or municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, or requirements of any governmental authority regulating, relating to
or imposing liability or standards of conduct concerning environmental
protection, health or safety matters, as they may now exist or be amended prior
to Closing, including all requirements pertaining to reporting, licensing,
permitting, investigation, removal or remediation of emissions, discharges,
releases, or threatened releases of Hazardous Materials, chemical substances,
pollutants or contaminants or relating to the manufacture, generation,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of Hazardous Materials, chemical substances, pollutants or
contaminants, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 ("CERCLA"), the Toxic Substance
Control Act ("TSCA"), the Resource Conservation and Recovery Act ("RCRA"), the
Clean Air Act ("CAA"), the Clean Water Act ("CWA"), and the Occupational Safety
and Health Act of 1970 ("OSHA"), all as may have been amended prior to Closing.
(p) "EPA" means the United States Environmental Protection Agency.
(q) "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
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(r) "Financial Audit" shall have the meaning set forth in Section 7(d).
(s) "GAAP" means United States Generally Accepted Accounting Principles
consistently applied.
(t) "Governmental Body" means any domestic or foreign national, state
or municipal or other local government or any subdivision, agency, commission or
authority thereof, including any special tax, regulatory or other governmental
entity.
(u) "Hazardous Materials" means any substance (a) the presence of which
at, on, over, beneath, in or upon any real or personal property, building,
structure, container of any nature or description, subsurface strata, ambient
air or ambient water (including surface and groundwater) requires investigation,
removal or remediation under any Environmental Law or common law, (b) which is
defined as a "hazardous substance," "hazardous material," "hazardous waste,"
"pollutant," or "contaminant" under any Environmental Law, and/or (c) which is
toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic,
mutagenic, or otherwise hazardous and is or becomes regulated by any
governmental authority under any Environmental Law, (d) the presence of which
causes a nuisance or trespass upon adjacent properties, and/or (e) which
contains urea-formaldehyde, polychlorinated biphenyls, asbestos or asbestos
containing materials, radon, petroleum and petroleum products.
(v) "Intangible Assets" shall refer to all trade secrets, tradenames,
trademarks, and Customer agreements.
(w) "Intellectual Property" shall refer to the trade name Time Direct
and the domain name xxxxxxxxxxxxxx.xxx.
(x) "Inventory" shall refer to all tangible personal property used by
TDL in its business, whether owned, leased, otherwise held and used by TDL, and
acquired and sold in the Ordinary Course of Business which is on hand at
Closing.
(y) "Knowledge" means actual knowledge or knowledge that should have
been reasonably known in the conduct of the TDL Business without independent
investigation.
(z) "TDL Assets" shall mean the Tangible Assets, the Intangible Assets,
the Leased Property, all contract rights, all claims, liquidated or
un-liquidated, all equipment, all assets of any kind or nature presently leased
or owned by the business as of the Closing Date, and all assets of any kind and
nature leased or owned directly or indirectly in connection with the TDL
Business.
(aa) "TDL Business" shall mean a service provided to home builders and
home owners which provides electronic and communication automation of a home and
the devices associated therewith.
(bb "Leased Property" shall refer to all personal property, equipment,
tools, and supplies leased by TDL from a third party;
(cc) "TDL Closing Balance Sheet" has the meaning set forth in Section
2(c)(i)(A).
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(dd) "TDL Financial Statements" has the meaning set forth in Section
6(g) below.
(ee) "TDL Liabilities" shall mean all liabilities, obligations and
debts of TDL as of the Closing Date, whether liquidated or unliquidated,
contingent or otherwise due and owing as of Closing or which relate to any
period prior to the Closing Date, including the Sellers Notes and any taxes, but
shall not refer to such liabilities, obligations or debts which mature after the
Closing Date or relate to any period after the Closing Date. Any such
liabilities, obligations and debts which relate to a period of time extending
both before and after Closing shall be prorated between the Sellers and TDL in
ratio to the number of days before and after the Closing.
(ff) "TDL Interest" means any portion or all portions of the TDL
Interest. The TDL Interest is owned 60% by Xxxxxxx and 40% by Xxxx.
(gg) "TDL" has the meaning set forth in the recitals set forth above.
(hh) "Most Recent TDL Fiscal Month End" has the meaning set forth in
Section 6(g)(ii) below.
(ii) "Ordinary Course of Business" means the ordinary course of TDL's
Business consistent with past custom and practice.
(jj) "Party" has the meaning set forth in the preface above.
(kk) "Pension Plan" TDL has no Pension Plans, 401(k) plans, or other
employee benefit programs other than employee health insurance.
(ll) "Person" means any individual, corporation, partnership, joint
venture, trust, association, unincorporated organization, other entity or
Governmental Body.
(mm) "Purchase Price" has the meaning set forth in Section 2.
(nn) "Review Period" shall mean the period from the execution of this
Agreement until Closing.
(oo) "Securities Act" means the Securities Act of 1933, as amended.
(pp) "Security Interest" means any mortgage, pledge, security interest,
encumbrance, charge, claim, or other lien, other than: (a) mechanic's,
materialmen's and similar liens; (b) liens for Taxes not yet due and payable or
for Taxes that the taxpayer is contesting in good faith through appropriate
proceedings; (c) liens arising under worker's compensation, unemployment
insurance, social security, retirement and similar legislation; (d) liens
arising in connection with sales of foreign receivables; (e) liens on goods in
transit incurred pursuant to documentary letters of credit; (f) purchase money
liens and liens securing rental payments under capital lease arrangements; and
(g) other liens arising in the Ordinary Course of Business and not incurred in
connection with the borrowing of money.
(qq) "Sellers" has the meaning set forth in the preface above.
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(rr) "TDL Debt" means all Seller Debt shown on the Balance Sheet for
the most recent TDL fiscal month end as adjusted by the TDL Closing Balance
Sheet, including capital leases, vendor and supplier debt, and accounts payable.
(ss) "Tangible Assets" means all assets other than the Intangible
Assets and Intellectual Property owned by TDL and all rights and obligations
with respect to the employees of TDL including furniture, fixtures, equipment,
computers and peripheral equipment and any other asset that has a physical
embodiment.
(tt) "Tax or Taxes" means any federal, state, local or foreign income,
gross receipts, capital stock, franchise, profits, withholding, social security,
unemployment, disability, real property, personal property, stamp, excise,
occupation, sales, use, transfer, value added, alternative minimum, estimated,
net worth, or other tax, including any interest, penalty or addition thereto,
whether disputed or not.
(uu) "Transition Period" has the meaning set forth in Section 8(b).
SECTION 2. PURCHASE AND SALE OF THE TDL INTEREST.
(a) Basic Transaction. On and subject to the terms and conditions of
this Agreement, and subject to the adjustments set forth herein, Buyer
agrees to purchase from the Sellers, and the Sellers agree to sell to
the Buyer, all of their TDL Interest and enter into the Employment
Agreement attached to this Agreement for a total aggregate
consideration of $300,000 (the "Purchase Price"), subject to adjustment
as set forth in Section 2(c), below, and payable as specified in
Section 2(b), below. $25,000 of the Purchase Price ("Cash Purchase
Payment") shall be paid at Closing, $75,000 shall be evidenced by
Buyers Promissory Note payable 40% to Xxxxxxx X. Xxxx and 60% to
Xxxxxxx Xxxxxxx in the form of Exhibit A due on the sooner of the
receipt of the funding as set forth in Section 2(d) or 90 days from
Closing (" First Promissory Note"), $100,000 shall be paid on the first
anniversary of Closing ("First Goodwill Payment"), and the balance of
the Purchase Price paid on the second anniversary of the Closing
("Second Good Will Payment"). The First Goodwill Payment and the Second
Goodwill Payment shall be represented by a Second Promissory Note
payable to Sellers in the form of the Second Promissory Note attached
hereto as Exhibit B ("Second Promissory Note").
(b) Form of Payment. At the Closing the Buyer shall pay by certified
funds or wire transfer $25,000 of the Purchase Price to Sellers in
proportion to their respective Interests ("Cash Purchase Payment") and
deliver the First Promissory Note and the Second Promissory Note to
Sellers. Sixty Percent (60%) of the Purchase Price shall be paid to
Xxxxxxx and Forty Percent (40%) of the Purchase Price shall be paid to
Xxxx in exchange for their respective Membership Interest in TDL. The
remaining $200,000 ("Good Will Purchase Price") of the Purchase Price
shall be paid pursuant to the terms of the Second Promissory Note in
consideration for the Good Will.
(c) Adjustments to Purchase Price.
(i) Sellers shall prepare and present to Buyer at Closing:
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(A) the "TDL Closing Balance Sheet," which shall be
the Closing Balance Sheet for TDL on a fully consolidated
basis, which balance sheet shall be prepared on a basis
consistent with the TDL Financial Statements and which shall
be current with respect to TDL's financial condition at the
close of business on the day immediately before the Closing
Date; and
(B) a statement of the book value of TDL's Accounts
Receivable and other current assets in the aggregate current
as of the close of business on the day immediately before the
Closing Date based upon such TDL Closing Balance Sheet,
together with any information used in the preparation of such
balance sheet and book values that Buyer reasonably requests.
(ii) The Purchase Price shall be adjusted at Closing as
follows:
(A) decreased by the decrease, if any, between the
value of TDL's Accounts Receivable, Inventory and all other
current assets in the aggregate shown on the March 31, 2000
financial statements and the amount shown on the TDL Closing
Balance Sheet;
(B) decreased by the increase, if any, between the
TDL Current Liabilities shown on the March 31, 2000 financial
statement and the amount shown on the TDL Closing Balance
Sheet.
(C) Upon the completion of the audit as provided for
in paragraphs 6(g)(ii), the audit shall be substituted for the
TDL Closing Balance Sheet and any further adjustments to the
Purchase Price shall be made based on such audit.
(D) The Purchase Price shall be adjusted as set forth
above, only in the event that the total of items 2(c)(ii)(A)
and 2(c)(ii)(B) exceed $5,000, in which event the Purchase
Price shall be adjusted by the total amount of such items.
(E) decreased by the amount of any of the TDL
Liabilities not disclosed on the TDL Closing Balance Sheet
which is validly asserted against TDL within one year after
the Closing Date. Sellers agree to reimburse Buyer for any
such liability within 20 days of payment thereof by or on
behalf of either TDL or Buyer.
(F) Any decrease in the Purchase Price shall be
allocated 60% to Xxxxxxx and 40% to Xxxx.
(G) Any decrease in the Purchase Price shall be first
allocated to the Good Will Purchase Price to its full extent
and then to the Cash Purchase Payment and such amounts shall
be offset against the first payments of the Good Will Purchase
Price and to the extent such offset exceeds the First Payment
of the Good Will Purchase Price then against the amount of the
second payment of the Good Will Purchase.
(d) Reconveyance of the TDL Interest Funding Requirement The parties
acknowledge that within 90 days of Closing, IntelliReady shall have received
funding of not less
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than $1,000,000, either by way of debt, equity, or a combination of them. In the
event such amount is not timely received, IntelliReady shall reconvey the TDL
Interest to Sellers in proportion to their interest as shown herein, the Sellers
shall be the owners of TDL as it exists at the time of the reconveyance, and the
parties shall be relieved of any obligations hereunder. The right to receive
such reconveyance along with the right to keep the Cash Purchase Payment shall
be the sole and exclusive remedy in the event IntelliReady does not receive the
funding set forth herein.
(e) The Closing. The Closing of this Agreement (the "Closing") shall
take place at such place as mutually selected by the Parties on or before May
20, 2000.
(f) Deliveries at Closing. At the Closing:
(i) the Sellers will deliver to the Buyer:
(A) the various certificates, instruments and
documents referred to, in or contemplated by Section 9(a)
below; and
(B) the certificates representing all of the TDL
Interest, duly endorsed for transfer or accompanied by duly
executed stock powers endorsed in blank.
(C) the fully executed Employment Agreements
(ii) the Buyer will deliver to the Sellers:
(A) the various certificates, instruments and
documents referred to, in or contemplated by Section 9(b)
below; and
(B) the Cash Payment
(C) the First Promissory Note and the Second
Promissory Notes
(D) the fully executed Employment Agreements
SECTION 3. TAX MATTERS.
(a) Final Income Tax Returns. Prior to the date which is 45 days prior
to the due date of any of the following returns, including any extensions of
time, Sellers shall, consistent with the terms of Section 3(c), prepare and
submit to Buyer each federal and state income tax return of TDL for any taxable
periods ending upon the close of business on the Closing Date, for which returns
have not been filed prior to the Closing Date (the "Final Returns"). Buyer shall
review such returns, and within 20 days of Buyer's receipt of any such return,
notify Sellers of any changes thereto desired by Buyer. Sellers shall make such
changes as Buyer shall propose which are necessary to make the Final Returns
consistent with the agreements of the Parties as set forth in this Section 3 and
cause the Final Returns to be timely filed (which timely filing may include all
extensions to file as may be legally obtained by the Sellers), and a copy
thereof to be delivered to Buyer. Buyer and TDL shall cooperate with and assist
tax advisors of the Sellers, as may be reasonably requested by the Sellers in
the preparation of data necessary for filing any tax
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return of TDL for any period including the Closing Date and ending upon the
close of business on the Closing Date to the extent that such data is based on
the operations of TDL.
(b) Allocation of Income and Initial TDL Consolidated Tax Returns.
Buyer shall be responsible for all Taxes of TDL for the activities and
operations of TDL occurring after the close of business on the Closing Date and
shall also be responsible for and pay the taxes, to the extent that such Taxes
are reflected as a liability on the Balance Sheet. The taxable income or loss of
TDL to be allocated to the periods or portions thereof including the Closing
Date and ending upon the close of business on the Closing Date shall be
determined by an actual closing of TDL 's books and records and not on a
pro-rata basis. Sellers shall be responsible for all taxes, personal or
otherwise, attributable to the undertakings herein which are taxable to them and
any taxes, personal or otherwise, owed for the period prior to Closing.
(c) Consistent Reporting. Each of the Sellers, Buyer, and TDL agree for
all federal, state and local income and franchise tax reporting purposes to
report the consequences of the transactions contemplated by this Agreement in a
manner (a) consistent with the terms of this Agreement and (b) consistent with
the allocation of Purchase Price to the assets of TDL set forth in Exhibit C.
(d) Tax Audits.
(i) In the event that any taxing authority shall notify any
Party of any investigation, inquiry or audit involving the federal or
state income tax returns of TDL for a period including the Closing Date
and ending upon the close of business on the Closing Date, the notified
Party shall notify all other Parties. Sellers shall be responsible for
and assume the defense and control all aspects of any such inquiry,
investigation or audit involving the tax returns of TDL for any period
including the Closing Date and ending upon the close of business on the
Closing Date, including all costs and expenses incurred by the Sellers
in connection therewith. TDL shall make available such records and
documents in their possession as may be reasonably requested by the
Sellers or legally requested by such taxing authority. TDL shall
reasonably cooperate with and assist the Sellers and such taxing
authority in the completion of such inquiry, investigation or audit and
shall advise the Sellers of the commencement and progress of any such
audit following receipt of notice thereof by TDL.
(ii) In the event that any taxing authority shall notify any
Party of any investigation, inquiry or audit involving the tax returns
of TDL for a period commencing after the close of business on the
Closing Date, the notified Party shall immediately notify all other
Parties. Buyer shall be responsible for and assume the defense and
control all aspects of any such inquiry, investigation or audit,
including all costs and expenses incurred by Buyer in connection
therewith. To the extent necessary, Buyer shall engage legal counsel
with respect to state tax matters that are reasonably acceptable to the
Sellers. Sellers shall make available to Buyer such records and
documents in his possession as may be reasonably requested by any Buyer
or legally requested by such taxing authority. Sellers shall reasonably
cooperate with and assist Buyer and TDL and such taxing authority in
the completion of such inquiry, investigation or audit. Buyer and TDL
shall be responsible for all costs and expenses incurred by them in
connection with any inquiry, investigation or audit involving the tax
returns of TDL for any period commencing after the close of business on
the Closing Date. Buyer shall keep Sellers
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reasonably informed of the status of any such investigation, inquiry or
audit, including any settlement, appeal, payment of sums due or other
agreement arising out of such investigation, inquiry or audit. Buyer
shall have the right to amend any Final Income Tax Returns to reflect
the final outcome of any such inquiry, investigation or audit.
(iii) In the event that any taxing authority shall notify any
Party of any investigation, inquiry or audit involving the tax returns
of TDL for a period commencing before the close of business on the
Closing Date and such period continues after the Closing Date, the
notified Party shall immediately notify all other Parties. Buyer shall
be responsible for and assume the defense and control all aspects of
any such inquiry, investigation or audit, including all costs and
expenses incurred by Buyer in connection therewith. To the extent
necessary, Buyer shall engage legal counsel with respect to tax matters
that are reasonably acceptable to the Sellers. Sellers shall make
available to Buyer such records and documents in his possession as may
be reasonably requested by any Buyer or legally requested by such
taxing authority. Sellers shall reasonably cooperate with and assist
Buyer and TDL and such taxing authority in the completion of such
inquiry, investigation or audit. Buyer and TDL shall be responsible for
all costs and expenses incurred by them in connection with any inquiry,
investigation or audit involving the tax returns of TDL for any period
commencing after the close of business on the Closing Date. Buyer shall
keep Sellers reasonably informed of the status of any such
investigation, inquiry or audit, including any settlement, appeal,
payment of sums due or other agreement arising out of such
investigation, inquiry or audit. Buyer shall have the right to amend
any Final Income Tax Returns to reflect the final outcome of any such
inquiry, investigation or audit. All costs incurred for such audit
including any tax due and owing, penalties, interest, attorneys fees,
expert witness fees, accountants fees and other expenses incurred in
connection with the audit shall be divided between the Parties in the
ratio of the tax liability attributable to events occurring before the
Closing Date and the tax liability attributable to events occurring
after the Closing Date.
(e) General Tax Allocation and Reporting Except as otherwise
specifically provided for herein, all other Taxes shall be borne by the party
incurring same including but not limited to the following: any sales taxes
imposed on the transactions contemplated herein shall be borne by Seller, all
taxes attributable to the transactions contemplated that represent a gain to
Sellers shall be borne by Sellers, all taxes of any nature imposed by virtue of
any event occurring prior to the Closing Date shall be borne by the Sellers, all
taxes of any nature imposed by virtue of any event occurring after the Closing
Date shall be borne by the Buyer or TDL, any taxes of any nature imposed by
virtue of any event occurring both prior to and after the Closing Date shall be
borne as set forth in Section 3(d)(iii) and any other taxes shall be borne by
the party legally responsible for same.
SECTION 4. REPRESENTATIONS OF THE SELLERS CONCERNING THE TRANSACTION. Subject to
the information disclosed in the Schedules of this Agreement, including without
limitation items disclosed on the Disclosure Statements, the Sellers represent
to the Buyer that the statements contained in this Section 4 are correct and
complete as of the date of this Agreement.
(a) Authorization of Transaction. The Sellers have full power and
authority to execute and deliver this Agreement and to perform their obligations
hereunder. This Agreement constitutes the valid and legally binding obligation
of the Sellers, enforceable in accordance with
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its terms and conditions. The Sellers do not need to give any notice to, make
any filing with, or obtain any authorization, consent or approval of any
government or governmental agency in order to consummate the transactions
contemplated by this Agreement.
(b) Noncontravention. Neither the execution and delivery of this
Agreement, nor consummation of the transactions contemplated hereby, will:
(i) violate any statute, regulation, rule, judgment, order,
decree, stipulation, injunction, charge or other restriction of any
government, governmental agency or court to which the Sellers or TDL is
subject; or
(ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any Person the
right to accelerate, terminate, modify or cancel, or require any notice
under any contract, lease, master lease, sublease, license, sublicense,
franchise, permit, indenture, agreement or mortgage for borrowed money,
instrument of indebtedness, Security Interest or other arrangement to
which the Sellers are a party or by which they are bound or to which
any of their assets are subject.
(c) Transfer of TDL Interest. The Sellers are the lawful owners of the
TDL Interest to be sold, transferred and delivered by them to the Buyer
hereunder, free and clear of any restrictions on transfer other than any
restrictions under the Securities Act or applicable state securities laws or
agreements among the Sellers, TDL or others as to the transferability of the TDL
Interest, copies of which are included in the Disclosure Schedule, Taxes,
Security Interests, options, warrants, purchase rights, contracts, commitments,
equities, claims and demands. Other than this Agreement, there are no
outstanding or authorized options, warrants, rights, contracts, calls, puts,
rights to subscribe, conversion rights or other agreements or commitments
providing for the disposition or acquisition of any TDL Interest or other equity
interest in TDL. The TDL Interest to be sold, transferred and delivered to the
Buyer hereunder represent all of the issued and outstanding capital stock of
TDL.
(d) Brokers' Fees. The Sellers and TDL have no liability or obligation
to pay any fees or commissions to any broker, finder or agent with respect to
the transactions contemplated by this Agreement for which Buyer could become
liable or obligated.
SECTION 5. REPRESENTATIONS OF THE BUYER CONCERNING THE TRANSACTION. The Buyer
represents to the Sellers that the statements contained in this Section 5 are
correct and complete as of the date of this Agreement.
(a) Organization. The Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation.
(b) Authorization of Transaction. The Buyer has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of the Buyer, enforceable
in accordance with its terms and conditions. The Buyer need not give any notice
to, make any filing with or obtain any authorization, consent or approval of any
government or governmental agency in order to consummate the transactions
contemplated by this Agreement except for such notice filings as may be required
under federal or applicable state
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securities laws and except for any filings pursuant to the Securities Act, which
may be required in connection with the Buyer's financing of the transactions
contemplated by this Agreement.
(c) Noncontravention. Neither the execution and delivery of this
Agreement, nor consummation of the transactions contemplated hereby, will: (A)
violate any statute, regulation, rule, judgment, order, decree, stipulation,
injunction, charge or other restriction of any government, governmental agency
or court to which the Buyer is subject or any provision of its charter or
bylaws; or (B) conflict with, result in a breach of, constitute a default under,
result in the acceleration of, create in any Person the right to accelerate,
terminate, modify or cancel, or require any notice under any contract, lease,
sublease, license, sublicense, franchise, permit, indenture, agreement or
mortgage for borrowed money, instrument of indebtedness, Security Interest, or
other arrangement to which the Buyer is a party or by which it is bound or to
which any of its assets are subject.
(d) Brokers' Fees. The Buyer has no liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Sellers could become
liable or obligated.
(e) Investment. Buyer: (i) understands that the TDL Interest have not
been, and will not be, registered under the Securities Act, or under any state
securities laws, and are being offered and sold in reliance upon federal and
state exemptions for transactions not involving any public offering; (ii) is
acquiring the TDL Interest solely for its own account for investment purposes
and not with a view to the distribution thereof; (iii) is an "Accredited
Investor" within the meaning of Rule 501(a) promulgated under the Securities
Act; (iv) has received certain information concerning TDL and has had the
opportunity to obtain additional information as desired in order to evaluate the
merits and risks inherent in holding the TDL Interest; and (v) acknowledges that
any information concerning TDL is based on historical data and any projections
were made as good faith estimates.
(f) IntelliReady Stock Option Plan and Employment Agreement. At or
before Closing the IntelliReady Equity Incentive Plan shall have been approved
by the shareholders of IntelliReady and adopted by the Buyer. The Employment
Agreements that are attached as Exhibits D and E (the "Employment Agreements")
and that will be executed on or before Closing will at such Closing constitute
valid, binding, and enforceable agreements of IntelliReady. IntelliReady has
sufficient shares of stock allocated to the Equity Incentive Plan to fulfill its
obligation under the Employment Agreements.
(g) Employment of Existing TDL Employees. Immediately after closing,
the Buyer may offer the employees of TDL identified on Exhibit F full time
employment with Buyer.
SECTION 6. REPRESENTATIONS CONCERNING TDL. The Sellers represent to the Buyer
that the statements contained in this Section 6 are correct and complete as of
the date of this Agreement and will be correct and complete as of the Closing
Date (as though made then and as though the Closing Date were substituted for
the date of this Agreement through this Section 6), except as set forth in the
Disclosure Statement delivered by the Sellers to the Buyer on the date hereof
and initialed by the Parties, as subsequently updated or supplemented by the
Sellers prior to the Closing and attached hereto and incorporated herein as
Exhibit G (the "Disclosure Schedule"). The Disclosure Schedule will be arranged
in paragraphs corresponding to the lettered and numbered paragraphs contained in
this Section 6.
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(a) Subsidiaries. TDL does not have any majority or partially owned
subsidiaries and is not the holder of any capital stock, security or equity
interest in any other corporation or Person.
(b) Organization, Qualification and Corporate Power. TDL is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Colorado. TDL has offices and employees only in Colorado. TDL
agrees to file such state tax returns as may be reasonably required to comply
with applicable state law. Section 6(b) of the Disclosure Schedule consists of
true and correct copies of:
(i) the Articles of Organization, as amended, and the
Operating Agreement of TDL;
(ii) the minute book of TDL containing all existing records of
all proceedings, consents, actions and meetings of the Members and
Managers of TDL; and
(iii) the transfer ledger of TDL and an Limited Liability
Interest holder list setting forth all owners of the TDL Interest as
they appear in the transfer ledger of TDL;
(c) Owned Property. Sellers represent that, except as provided in the
leases identified in response to Section 6(k), in the Contracts listed in
Section 6(m) hereof, and as disclosed on the Disclosure Schedule, no other
person or entity has any rights of any kind in any of the Tangible and
Intangible and that to their Knowledge no other person or entity has any rights
of any kind in any of the Intellectual Property, that might or does interfere
with the exclusive unrestricted use of any of such TDL Assets both before or
after the Closing Date and the completion of the transactions contemplated
herein. Sellers further represent TDL has the sole and exclusive right to own,
possess and use (subject to the rights granted in the Contracts listed in
Section 6(m) hereof) all Tangible and Intangible Assets required for the
operation of the business as it operates free and clear of all claims of any
other person or entity. To the Sellers' Knowledge, TDL has the sole and
exclusive right to all legal protection of the Intellectual Property, statutory
or otherwise, including the right to patent and/or trademark solely in the name
of TDL. To the Sellers' Knowledge TDL has secured all rights to patents,
trademarks and other legally available protections of the ownership and use of
the Intellectual Property including assignments as required from any coauthor,
co-writer, licensees or other parties who may claim an interest in the
Intellectual Property under any legal theory including but not limited to the
legal theory of work for hire. The Buyer understands and acknowledges that
neither Sellers nor TDL has obtained or applied for a Federal Trademark of the
name Time Direct or the domain name Xxxxxxxxxxxxxx.xxx.
(d) Environmental Laws. The Sellers have no knowledge that TDL is in
violation of any Environmental Law or Laws, and TDL has not received any notice
from any person or entity, including but not limited to any governmental
agencies of any claim of any such violation.
(e) TDL Liability. TDL will, at Closing, have no liability, contingent,
certain or fixed, except: (i) as listed on the TDL Closing Balance Sheet, (ii)
as disclosed in Section 6(e) of the Disclosure Schedule, and (iii) as expressly
permitted in this Agreement.
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(f) Noncontravention. To the Knowledge of Sellers, neither the
execution and delivery of this Agreement, nor consummation of the transactions
contemplated hereby, by Sellers, Buyer or TDL will:
(i) violate any statute, regulation, rule, judgment, order,
decree, stipulation, injunction, charge or other restriction of any
government, governmental agency or court to which TDL is subject or any
provision of the charter or bylaws of TDL; or
(ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any Person the
right to accelerate, terminate, modify or cancel, or require any notice
under any contract, lease, Master Lease, sublease, license, sublicense,
franchise, permit, indenture, agreement or mortgage for borrowed money,
instrument of indebtedness, Security Interest or other arrangement to
which TDL is a party or by which it is bound or to which any of its
assets are subject (or result in the imposition of any Security
Interest upon any of its assets), except where the violation, conflict,
breach, default, acceleration, termination, modification, cancellation,
failure to give notice, or Security Interest would not have a material
adverse effect on the financial condition of TDL or on the ability of
the Parties to consummate the transactions contemplated by this
Agreement. TDL does not need to give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any
government or governmental agency in order for the Parties to
consummate the transactions contemplated by this Agreement.
(g) TDL Financial Statements. The Buyer acknowledges receipt of the
following financial statements (collectively, the "TDL Financial Statements"):
(i) unaudited consolidated and consolidating balance sheets
and statements of income, changes in stockholders' equity and cash flow
as of and for each of the years ended December 31, 1999 and 1998, for
TDL; and
(ii) unaudited consolidated and consolidating balance sheets
and statements of income, changes in stockholders' equity and cash flow
as of and for the month ending April 30, 2000 (the "Most Recent TDL
Fiscal Month End") for TDL. The TDL Financial Statements present fairly
the financial condition of TDL as of such dates and the results of
operations of TDL for such periods, are correct and complete, and are
consistent with the books and records of TDL, which books and records
are correct and complete.
(iii) Audit. The Buyer's accountants shall be permitted to
conduct And certify an audit of the years 1998 and 1999 plus the
portion of 2000 from January 1, 2000 until the end of the month just
preceding the Closing for TDL. Buyer shall pay the cost of such Audit.
The Seller will permit and will cause TDL to permit the Buyer and its
independent accountants to conduct such Audit of the TDL Financial
Statements in accordance with generally accepted auditing standards and
the rules and regulations of the Securities and Exchange Commission.
The Seller will permit and cause TDL to provide complete access to all
books and records of TDL and will provide all representation letters
and other certificates as necessary, in the judgment of Buyer, to
complete the Audit as contemplated by this Section 6(g)(iii). The
Seller acknowledges that the purpose of the Audit is to prepare the TDL
Closing Balance Sheet and TDL
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Financial Statements, including the notes thereto, included in a
registration statement filed by the Buyer of any affiliated entity
under the Securities Act (the "Financial Statements"). The Seller and
TDL consent to the inclusion of the Financial Statements and other
information concerning TDL in such registration statement, provided,
however, that the Seller shall have no liability to Buyer with respect
to the Audit and the presentation of the Financial Statements in such
registrations statement. The preceding limitation shall not be deemed
to limit the Seller's contractual liability to Buyer with respect to
the representations made in Section 6 hereof. In the event that Buyer
does not close the transaction contemplated by this Agreement for any
reason except due to the fault of Seller, upon payment of all costs
incurred by Buyer as set forth above, the Audit materials shall become
the property of TDL.
(h) Events Subsequent to Most Recent TDL Fiscal Month End. Since the
March 31, 2000 Financial Statement, and except as disclosed on Section 6(h) of
the Disclosure Schedule, to Sellers' Knowledge there has not been, occurred or
arisen, with respect to TDL:
(i) any change or amendment in its Articles of Organization or
Operating Agreement, or other governing instruments;
(ii) any reclassification, split up or other change in, or
amendment of or modification to, the rights of the holders of any of
its Interests;
(iii) any direct or indirect redemption, purchase or
acquisition by any Person of any of its Interests or of any interest in
or right to acquire any such Interests;
(iv) the organization of any subsidiary or the acquisition of
any shares of capital stock by any Person or any equity or ownership
interest in any business;
(v) any material damage, destruction or loss of any of its
properties or assets (whether or not covered by insurance), except in
the Ordinary Course of Business;
(vi) any sale, lease, transfer, or assignment of any of its
material assets, tangible or intangible, other than for a fair
consideration in the Ordinary Course of Business;
(vii) the execution of, or any other commitment to any,
material agreement, contract, lease, or license (or series of related
agreements, contracts, leases, and licenses) outside the Ordinary
Course of Business;
(viii) any acceleration, termination, modification, or
cancellation of any agreement, contract, lease, or license (or series
of related agreements, contracts, leases, and licenses) involving more
than $20,000 to which it is a party or by which it is bound;
(ix) any Security Interest imposed upon any of its assets,
tangible or intangible;
(x) any capital expenditure (or series of related capital
expenditures) either involving more than $20,000 or outside the
Ordinary Course of Business;
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(xi) any capital investment in, any loan to, or any
acquisition of the securities or assets of, any other Person (or series
of related capital investments, loans, and acquisitions) either
involving more than $20,000 or outside the Ordinary Course of Business;
(xii) any issuance of any note, bond, or other debt security
or created, incurred, assumed, or guaranteed any indebtedness for
borrowed money or capitalized lease obligation involving more than
$20,000;
(xiii) any delay or postponement of the payment of accounts
payable or other liabilities other than those being contested in good
faith;
(xiv) any cancellation, compromise, waiver, or release of any
right or claim (or series of related rights and claims) either
involving more than $20,000 or outside the Ordinary Course of Business;
(xv) any declaration, set aside, or payment of any dividend or
any distribution, with respect to its capital stock (whether in cash or
in kind) or any redemption, purchase, or other acquisition of any of
its capital stock;
(xvi) any loan to, or any entrance into any other transaction
with, any of its directors, officers, and employees outside the
Ordinary Course of Business;
(xvii) the adoption, amendment, modification, or termination
of any bonus, profit-sharing, incentive, severance, or other plan,
contract, or commitment for the benefit of any of its directors,
officers, and employees;
(xviii) any charitable or other capital contribution in excess
of $2,500; or
(xix) any agreement or commitment, whether in writing or
otherwise, to do any of the foregoing.
(i) Tax Matters.
(i) TDL has filed all Tax returns that it is required to file
prior to the Closing Date, and has paid all Taxes shown as due and
owing, with respect to TDL on such Tax returns.
(ii) None of the federal, state, local, and foreign income Tax
returns filed with respect to TDL for years open under the applicable
statute of limitations have been audited, nor are any such Tax returns
currently under audit. The Sellers have delivered to the Buyer correct
and complete copies of all federal income Tax returns, examination
reports, and statements of deficiencies assessed against or agreed to
by TDL for all years since the fiscal year ending December 31, 1998,
and will deliver to Buyer copies of the foregoing filed or received by
the Sellers' or TDL prior to the Closing Date, all of which shall be
included as Section 6(j) of the Disclosure Schedule.
(iii) TDL has not waived any statute of limitations in respect
of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
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(iv) TDL was initially formed with the Secretary of State of
the State of Colorado on May 4, 1998. At all times since such date, TDL
has continually been a Colorado Limited Liability Company and taxed as
a partnership, as defined in the Code, and neither TDL nor any Interest
Holder of TDL has taken any action which could cause the termination of
TDL's treatment as a partnership for tax purposes. Sellers will not
take any action which could cause the termination of TDL's status as a
Limited Liability Company.
(j) Title to Assets. Except as otherwise disclosed on Section 6(j) of
the Disclosure Statement, TDL has good and marketable title to the properties
and TDL Assets owned and used by it as reflected in the TDL Financial Statements
or acquired after the date thereof (except for personal property sold since the
dates of the TDL Financial Statements), free and clear of all Security
Interests.
(k) Intellectual Property, TDL Assets and Equipment. Section 6(k) of
the Disclosure Schedule lists all of the Intellectual Property, TDL Tangible
Assets and Intangible Assets value in excess of $2,500. With respect to such
items:
(i) All of the Intellectual Property, TDL equipment, TDL
Assets and other TDL Tangible Assets and the TDL Intangible assets
owned and leased and used in TDL in its business:
(A) are in reasonably good working order and
condition (with respect to machinery, equipment and other
tangible assets), ordinary wear and tear excepted and subject
to the maintenance schedules customarily followed with respect
to each of these items; and
(B) are being used for their intended purpose and
within their designed capacity.
(ii) any leases for the leased TDL equipment and other
Tangible Assets, are in full force and effect and TDL holds a valid and
existing leasehold interest under each of the leases. Complete and
accurate copies of the leases for leased TDL equipment or other
Tangible Assets are included as part of Section 6(k) of the Disclosure
Statement. TDL is not in default, and no circumstances exist which, if
unremedied, would either with or without notice or the passage of time
or both, result in such default under any of such leases, nor, to the
Knowledge of the Sellers, is any other party to any of such leases in
default.
(l) Intellectual Property. Except as set forth in Section 6(l), to the
knowledge of Sellers, TDL owns or has the right to use all Intellectual Property
necessary for the operation of its businesses as presently conducted and has not
granted any license or sublicense under or with respect to any Intellectual
Property except as provided in the Contracts listed in Section 6(m). A listing
of the software licenses held and currently used by TDL in its business is
included as Section 6(l) of the Disclosure Schedule.
(m) Contracts. Except as provided in Section 6(cc) below, Section 6(m)
of the Disclosure Schedule is comprised of a true, complete and accurate list of
all material contracts or
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written arrangements executed by an officer or duly authorized employee of TDL
or to which TDL is a party either:
(i) involving more than $20,000, exclusive of normal and
ordinary purchase orders, or
(ii) in the nature of a collective bargaining agreement,
employment agreement, or severance agreement with any of its directors,
officers and employees. The Sellers have delivered to the Buyer a
correct and complete copy of each contract or agreement listed in
Section 6(m) of the Disclosure Schedule. Neither the Sellers nor TDL
has received any notices (whether oral or in writing) that any party to
any other such agreements is terminating, intends to terminate or is
considering terminating, any of the contracts, agreements or
understandings listed or required to be listed in Section 6(p) of the
Disclosure Schedule.
(n) Inventory Inventory shall consist of all Inventory on hand at
Closing
(o) Accounts Receivable. Section 6(o) of the Disclosure Schedule lists
all accounts receivable of TDL as of the Most Recent Fiscal Month End. Said
accounts receivable have arisen in the Ordinary Course of Business and represent
valid obligations due to TDL. To the Knowledge of the Sellers, such Accounts
Receivable (net of any reserve for doubtful accounts as reflected in Section
6(o) of the Disclosure Schedule) are collectible in accordance with their terms,
in the Ordinary Course of Business and in the aggregate recorded amounts
thereof. To the Knowledge of the Sellers or TDL, such Accounts Receivable are
not subject to any material set-offs or material counterclaims. At the Closing,
the Sellers shall amend Section 6(o) of the Disclosure Schedule to reflect all
accounts receivable of TDL as of the close of business for the day immediately
preceding the Closing Date.
(p) Notes to Interest Holders. All notes or other obligations payable
or owed to any Interest Holders or affiliated party are listed in Section 6(p)
of the Disclosure Statement. Sellers shall be liable for any and all tax or
other obligations occasioned by the payment of such obligations.
(q) Notes Receivable. Section 6(q) of the Disclosure Schedule
summarizes the outstanding terms, payment history and balance of the notes
receivable of TDL as of the Most Recent Fiscal Month End, which shall amended to
reflect the notes receivable of TDL as of the close of business for the day
immediately preceding the Closing Date. Said notes receivable have arisen (and
will arise) in the Ordinary Course of Business and represent (and as of the
Closing will represent) valid obligations due to TDL. Such notes receivable (net
of any reserve for doubtful accounts as reflected in the Disclosure Schedule)
are current in accordance with their terms, all in the Ordinary Course of
Business and in the aggregate recorded amounts thereof. To the Knowledge of the
Sellers or TDL, such notes receivable are not subject to any material set-offs
or material counterclaims.
(r) Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of TDL.
(s) Litigation. To the Knowledge of the Sellers, Section 6(s) of the
Disclosure Schedule sets forth each instance in which TDL:
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(i) is subject to any unsatisfied judgment, order, decree,
stipulation, injunction of any court or Governmental Body; or
(ii) is a party to any charge, complaint, action, suit,
proceeding or hearing of or in any court or quasi-judicial or
administrative agency of any federal, state, local or foreign
jurisdiction.
(t) Employee Benefits. There are not presently and never have been any
Employee Benefit Plans maintained by TDL or to which it contributes for the
benefit of any of its current or former employees except the current medical
benefits provided to TDL's employees. A description of the benefits that TDL
provides its employees and information concerning the cost of those benefits to
TDL appears as Section 6(t) of the Disclosure Statement.
(i) To the Knowledge of the Sellers each Employee Benefit Plan
(and each related trust or insurance contract) complies in form and in
operation in all respects with the applicable requirements of ERISA and
the Code;
(ii) The Sellers have delivered to the Buyer correct and
complete copies of the plan documents and summary plan descriptions,
and all related trust agreements, insurance contracts, and other
funding agreements which implement each Employee Benefit Plan.
(u) Banking Relationships. Section 6(u) of the Disclosure Schedule sets
forth the names and locations of all banks, trust companies, savings and loan
associations and other financial institutions at which TDL maintains safe
deposit boxes or accounts of any nature and the names of all persons authorized
to have access thereto, draw thereon or make withdrawals therefrom.
(v) Insurance. Section 6(v) of the Disclosure Schedule is comprised of
an accurate and complete description of all policies of insurance of any kind or
nature, including, but not limited to, health insurance, fire, liability,
workmen's compensation and other forms of insurance owned or held by or covering
TDL or all or any portion of its property and assets.
(w) Legal Compliance. To the Knowledge of the Sellers, and except as
disclosed in Section 6(w) of the Disclosure Schedule, TDL is in compliance with
all material and applicable laws (including rules and regulations thereunder) of
any Governmental Bodies having jurisdiction over TDL, including any requirements
relating to antitrust, consumer protection, currency exchange, equal
opportunity, health, occupational safety, pension and securities matters.
(x) Permits. Section 6(x) of the Disclosure Schedule is comprised of a
listing of all licenses, permits, orders or approvals held by TDL from
Governmental Bodies required for the conduct of TDL's business other than such
incidental licenses, permits and other authorizations which would be readily
obtainable by any qualified applicant without undue burden. To the Knowledge of
the Sellers, TDL has all licenses, permits, orders or approvals from
Governmental Bodies required for the conduct of its business as presently
conducted, and is not in material violation of any such license, permit, order
or approval. To the Knowledge of the Sellers:
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(i) all such licenses, permits, orders and approvals are in
full force and effect,
and
(ii) no suspension or cancellation thereof has been
threatened.
(y) Environment, Health and Safety. To the Knowledge of the Sellers,
except as set forth in Section 6(y) of the Disclosure Schedule, with respect to
TDL:
(i) No Hazardous Material has been disposed of on, released to
or from, threatened to be released to or from or is presently at, on,
beneath, in or upon any of the Leased Property or upon adjacent parcels
of Leased Property in amounts or concentrations which constitute or
constituted a violation of, or which could reasonably be expected to
give rise to liability under, any Environmental Law.
(ii) There has been no generation, production, refining,
processing, manufacturing, use, storage, disposal, treatment, shipment
or receipt of a Hazardous Material at or from the Leased Property or
relating to the operation of TDL in violation of or in a manner that
could give rise to liability under Environmental Laws.
(iii) The operations of TDL are in compliance and have been in
compliance with all applicable Environmental Laws, and there is no
violation of any Environmental Law with respect to the Leased Property
which could interfere with continued operation of TDL's business or
impair its fair saleable value.
(iv) Neither the Sellers nor TDL has received any notice of
violation, alleged violation, non-compliance, liability or potential
liability regarding environmental matters or compliance with
Environmental Laws with regard to the Leased Property from any
Governmental Body, nor does the Sellers or TDL have Knowledge or reason
to believe that any such notice will be received from or is being
threatened by any Governmental Body.
(v) No judicial proceedings, governmental administrative
actions, investigations or internal or non-public agency proceedings
are pending or threatened, under any Environmental Law, to which TDL is
or will be named as a party, nor are there any consent decrees, or
other decrees, consent orders, agreements, administrative orders or
other orders, judicial or administrative requirements outstanding under
any Environmental Law with respect to TDL.
(z) Brokers' Fees. TDL has no liability or obligation to pay any fees
or commissions to any broker, finder or agent with respect to the transactions
contemplated by this Agreement for which TDL could become liable or obligated.
(aa) Undisclosed Liabilities. To the Knowledge of the Sellers, TDL has
no liability (and to the Knowledge of the Sellers, there is no basis for any
present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against any of them giving rise to any liability),
except for:
(i) liabilities set forth on the face of the financial
statements for the Most Recent TDL Fiscal Month End;
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(ii) liabilities which have arisen in the Ordinary Course of
Business since the Most Recent TDL Fiscal Month End;
(iii) as disclosed in Section 6(aa) of the Disclosure
Statement; or,
(iv) as set forth on the Closing Balance Sheet.
(bb) Affiliate Transactions. No officer, director, employee, manager,
or member of TDL or any member of the immediate family of any such officer,
director or employee, or any entity in which any of such persons owns any
beneficial interest (other than any publicly-held corporation whose stock is
traded on a national securities exchange or in the over-the-counter market and
less than one percent of the stock of which is beneficially owned by any of such
persons), has any agreement with TDL or any interest in any of their property of
any nature, used in or pertaining to the business of TDL. None of the foregoing
Persons has any direct or indirect interest in any competitor, supplier or
Customer of TDL or in any Person from whom or to whom TDL leases any property or
transacts business of any nature.
(cc) Customers. Attached hereto as Section 6(cc) of the Disclosure
Statement are the contracts with each of the Customers. TDL has separate and
enforceable agreements with all of such Customers. TDL represents that all
agreements between TDL and the Customers are in full force and effect and are
not subject to any notice of default, termination or notice of any
dissatisfaction with the performance of TDL. To the Knowledge of Sellers, TDL's
relationship with its Customers is harmonious and satisfactory and Sellers have
no reason to believe that such Customers either have any intention not to
continue their business relationship with TDL for the duration of the present
agreement. In addition, Sellers have no Knowledge that any such Customer or
Underwriter intends not to renew its agreement with TDL at such time as the
current agreement expires. Sellers agree to use his best efforts following
Closing to advise such Customers and Underwriters of the general nature of the
transaction contemplated herein and to introduce any new representatives of TDL
after the Closing Date to such Customers and Underwriters. Following Closing,
Sellers agree to use his best efforts to make the transition from his ownership
of TDL to the ownership by Buyers as smooth as possible and to allay any
concerns that the Customers, Underwriters or other important relationships may
have.
(dd) Disclosure. To the Knowledge of Sellers, the representations and
warranties of the Sellers contained in this Agreement do not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements and information contained herein not misleading.
SECTION 7. PRE-CLOSING COVENANTS. The Parties agree as follows with respect to
the period between the execution of this Agreement and the Closing:
(a) General. Each of the Parties will use his or its commercially
reasonable efforts to take all action and to do all things necessary, proper or
advisable in order to consummate and make effective the transactions
contemplated by this Agreement (including satisfying the closing conditions set
forth in Section 9 below).
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(b) Operation of Business. The Sellers will not cause or permit TDL to
engage in any practice, take any action, embark on any course of inaction, or
enter into any material transaction outside the Ordinary Course of Business.
(c) Full Access. The Sellers will permit and will cause TDL to permit,
representatives of the Buyer, including counsel, lenders, appraisers and
accountants, to have full access, during normal business hours and in a manner
so as not to interfere with the normal business operations of TDL, to all
premises, properties, books, records, contracts, tax records and documents of or
pertaining to TDL. No review, examination or investigation by the Buyer shall
diminish or obviate any of the representations, warranties, covenants or
agreements of TDL or the Sellers under this Agreement.
(d) Audit. The Buyer's accountants shall be permitted to conduct and
certify an audit of the last two fiscal years plus the portion of 2000 from
January 1, 2000 until the end of the month just preceding the Closing for TDL
("Audit" or "Financial Audit"). The Sellers will permit and will cause TDL to
permit the Buyer and its independent accountants to conduct such Audit of the
TDL Financial Statements in accordance with generally accepted auditing
standards and the rules and regulations of the Securities and Exchange
Commission. The Sellers will permit and will cause TDL to provide complete
access to all books and records of TDL and will provide all representation
letters and other certificates as necessary, in the judgment of Buyer, to
complete the Audit as contemplated by this Section 7(d). The Sellers acknowledge
that the purpose of the Audit is to prepare the TDL Closing Balance Sheet and
TDL Financial Statements, including the notes thereto, included in a
registration statement filed by the Buyer of any affiliated entity under the
Securities Act (the "Financial Statements"). The Sellers and TDL consent to the
inclusion of the Financial Statements and other information concerning TDL in
such registration statement, provided, however, that the Sellers and TDL shall
have no liability to Buyer or TDL with respect to the Audit and the presentation
of the Financial Statements in such registration statement. The preceding
limitation shall not be deemed to limit the Sellers' contractual liability to
Buyer with respect to the representations made in Section 6 hereof. In the event
that Buyer does not close the transaction contemplated by this Agreement for any
reason except due to the fault of Sellers, the Audit materials shall become the
property of TDL.
(e) Confidentiality. The Buyer will treat and hold confidential any
Confidential Information of the Sellers or TDL it receives from the Sellers or
TDL, will not use any of such Confidential Information except in connection with
this Agreement, and, if this Agreement is terminated for any reason whatsoever,
will return to TDL all tangible embodiments (and all copies) of such
Confidential Information which are in its possession and will thereafter
continue to hold confidential any such Confidential Information received;
provided, however, that this sentence shall not apply to any information:
(i) which, at the time of disclosure, is available publicly;
(ii) which, after disclosure, becomes available publicly
through no failure of the Buyer;
(iii) which the Buyer knew or to which the Buyer had access
prior to disclosure; and further provided that in the event that the
Buyer is requested or required (by oral question or request for
information or documents in any legal proceeding) to disclose any such
Confidential Information, the Buyer will notify the Sellers promptly of
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the request or requirement so that the Sellers may seek an appropriate
protective order or waive compliance with the provisions of this
Section 7(e), and if in the absence of a protective order or the
receipt of a waiver hereunder, the Buyer is, on the advice of counsel,
compelled to disclose any such Confidential Information to any tribunal
or else stand liable for contempt, the Buyer may disclose such
Confidential Information to the tribunal, provided that the Buyer shall
use its reasonable efforts to obtain, at the reasonable request and
expense of the Sellers, an order or other assurance that confidential
treatment will be accorded to such portion of such Confidential
Information required to be disclosed as the Sellers shall designate.
(f) Notice of Events. The Sellers shall within five days thereafter
notify Buyer of:
(i) any event, condition or circumstance occurring from the
date hereof through the Closing Date that would constitute a violation
or breach of this Agreement; or
(ii) any event, occurrence, transaction or other item which
would have been required to have been disclosed on any Schedule or
Exhibit attached hereto had such event, occurrence, transaction or item
existed on the date hereof, other than items arising in the Ordinary
Course of Business which would not adversely alter any of the
representations, warranties or other agreements of the Sellers.
(g) No Negotiation. Until the earlier of:
(i) the Closing Date or
(ii) the date of termination of this Agreement, neither the
Sellers nor TDL shall, directly or indirectly through any officer,
director, employee or agent:
(A) Solicit, initiate or encourage the submission of
inquiries, proposals or offers from any person relating to any
acquisition or purchase of substantially all the assets of, or
any equity interest in, TDL or any exchange offer, merger,
consolidation, liquidation, dissolution or similar transaction
involving TDL;
(B) Enter into or participate in any discussions or
negotiations regarding any of the foregoing, or with the
intent to facilitate any of the foregoing, furnish to any
person (other than the Buyer and its representatives) any
information with respect to TDL; or
(C) Otherwise cooperate in any way with any Person,
other than Buyer to do or seek any of the foregoing.
The Sellers will notify the Buyer within two business days if any such
communication with respect to any of the foregoing is received or if any such
discussions, negotiations or other events occur or are sought to be initiated.
(h) Employment Agreements. At the Closing, Buyer agrees that it shall
cause Buyer to offer, on the Closing Date, an employment agreement to Xxxxxxx X.
Xxxxxxx and Xxxxxxx X. Xxxx on the terms set forth in individual contracts set
forth in Exhibits D and E attached hereto.
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SECTION 8. POST-CLOSING COVENANTS. The Parties agree as follows with respect to
the period following the Closing:
(a) General. In case at any time after the Closing any further action
is necessary or desirable to carry out the purposes of this Agreement, each of
the Parties will use commercially reasonable efforts to take such further action
(including the execution and delivery of such further instruments and documents)
as any other Party reasonably may request, all at the sole cost and expense of
the requesting Party.
(b) Transition. The Sellers will take no action that is primarily
designed or intended to have the effect of discouraging any lessor, licensor,
customer, supplier or other business associate of TDL from maintaining the same
business relationships with TDL after the Closing ("Transition Period") as it
maintained with TDL prior to the Closing.
(c) Access to Books and Records. For a period of three years after the
Closing Date, Sellers shall have reasonable access to TDL's books and records
for the purpose of preparing Sellers' individual income Tax returns. Thereafter,
the Sellers shall have commercially reasonable access to such books and records
(to the extent they are available) for the purpose of addressing any dispute
with or inquiry by any Governmental Body; provided, however, that such access
does not require Buyer to retain any of TDL's books and records for a period of
greater than four years.
(d) Company Name and Domain Name. In the event Buyer shall cease to
actively pursue the business being purchased pursuant to this Agreement for a
period of three consecutive months, Buyer shall convey the name Time Direct and
the domain name Xxxxxxxxxxxxxx.xxx and all rights thereto to Sellers.
(e) Confidentiality. The Sellers will treat and hold confidential any
Confidential Information of Buyer that it receives from the Buyer and will not
use any such Confidential Information except in connection with this Agreement,
and, if this Agreement is terminated for any reason whatsoever, will return to
the Buyer all tangible embodiments (and all copies) of such Confidential
Information which are in their possession and will thereafter continue to hold
confidential any such Confidential Information received; provided, however, that
this sentence shall not apply to any information:
(i) which, at the time of disclosure, is available publicly;
(ii) which, after disclosure, becomes available publicly
through no failure of the Sellers;
(iii) which the Sellers knew or to which they had access prior
to disclosure; and further provided that in the event that any Sellers
are requested or required (by oral question or request for information
or documents in any legal proceeding) to disclose any such Confidential
Information, the Sellers will notify the Buyer promptly of the request
or requirement so that the Buyer may seek an appropriate protective
order or waive compliance with the provisions of this Section 8(e), and
if in the absence of a protective order or the receipt of a waiver
hereunder, the Sellers are, on the advice of counsel,
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compelled to disclose any such Confidential Information to any tribunal
or else stand liable for contempt, the Sellers may disclose such
Confidential Information to the tribunal, provided that the Sellers
shall use their reasonable efforts to obtain, at the reasonable request
and expense of the Buyer, an order or other assurance that confidential
treatment will be accorded to such portion of such Confidential
Information required to be disclosed as the Buyer shall designate.
(f) Covenant Not to Compete. For a period of four (4) years from and
after the Closing Date, the Sellers individually will not engage as officers,
directors, consultants or otherwise, whether for pay or not in any business that
is principally a home automation company or engaged principally in home
automation and that directly or indirectly competes with some or all of the
TDL's business in any manner, provided, however, that no owner of less than 5%
of the outstanding stock of any publicly traded corporation shall be deemed to
engage in any of its businesses solely by reason thereof.
(g) Confidentiality. To the extent reasonably possible, Buyer shall
hold as Confidential Information, the material terms of this Agreement to
include the Employment Agreements attached hereto.
SECTION 9. CONDITIONS TO OBLIGATION TO CLOSE.
(a) Conditions to Obligation of the Buyer. The obligation of the Buyer
to consummate the transactions to be performed by them in connection with the
Closing is subject to satisfaction of the following conditions, any of which may
be waived by the Buyer only in writing:
(i) the representations of the Sellers set forth in Section 4
and the representations of Sellers set forth in Section 6 above shall
be true and correct in all material respects at and as of the Closing
Date and the Buyer shall have received a certificate from the Sellers
to that effect;
(ii) the Sellers and TDL shall have delivered all updates or
supplements to the Disclosure Schedule to make the information
contained therein not misleading and the Buyer shall have received a
certificate from the Sellers to that effect;
(iii) the Sellers shall have performed and complied with all
of their covenants hereunder in all material respects through the
Closing Date and the Buyer shall have received a certificate from the
Sellers that such covenants shall have been performed and complied with
through the Closing Date;
(iv) Sellers' delivery to Buyer of a certificate that, as of
the Closing Date, they have no knowledge or belief of the existence any
facts giving rise to a foreseeable material adverse change in the
business of TDL taken as a whole, financial or otherwise, regardless of
reason, including those changes that are as a result of any legislative
or regulatory change, revocation of any permits, licenses or rights to
do business, failure to obtain any permit at the normal time or in the
manner applied for by TDL, fire, explosion, accident, casualty, labor
trouble, flood, riot, storm, condemnation or act of God or otherwise;
and
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(v) at or prior to the Closing, the Sellers shall have
delivered to Buyer the originals of the corporate documents included in
Section 6(b) of the Disclosure Schedule;
(b) Conditions to Obligation of the Sellers. The obligation of the
Sellers to consummate the transactions to be performed by them in connection
with the Closing is subject to satisfaction of the following conditions any of
which may be waived by the Sellers only in writing:
(i) the representations set forth in Section 5 above shall be
true and correct in all material respects at and as of the Closing Date
and the Sellers shall have received a certificate from the appropriate
officers of Buyer to such effect;
(ii) the Buyer shall have performed and complied with all of
their covenants hereunder in all material respects through the Closing
Date and the Sellers shall have received a certificate from the
appropriate officers of Buyer to such effect;
(iii) as of the Closing, there shall not be any injunction,
order or decree in effect preventing the consummation of the
transactions contemplated by this Agreement;
SECTION 10. SURVIVAL OF PROVISIONS.
(a) Survival. All of the representations and warranties of the Parties
contained in this Agreement shall survive and continue in full force and effect
for a period of two years from the Closing Date, except:
(i) with respect to the covenant not to compete contained in
Section 8(e) hereof which shall survive for a period of four years from the
Closing Date; and
(ii) with regards to Tax matters which shall survive for a
period of time which is equal to the statute of limitations with respect to the
Tax liability being asserted.
SECTION 11. TERMINATION.
(a) Termination of Agreement. Certain of the Parties may terminate this
Agreement as provided below:
(i) The Buyer and the Sellers may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(iv) either Buyer or Sellers may terminate this Agreement by
giving written notice to the other Party if the Closing shall not have
occurred on or before , 2000 unless the Closing shall not have occurred
by such date because of a breach of this agreement by the terminating
party.
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to this Section, all rights and obligations of the Parties hereunder
shall terminate without any liability of
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any Party to any other Party except (i) the obligations of the Parties under
Sections 7(f) and 8(e) shall survive any such termination, (ii) and except as
provided for in Section 12 hereof.
SECTION 12. REMEDIES FOR BREACH OR TERMINATION.
(a) Good Faith Efforts to Settle Disputes. Each of the Parties agrees
that, prior to commencing any litigation against the other concerning any matter
with respect to which such Party intends to claim a right of indemnification in
such proceeding, such Parties shall meet in a timely manner and attempt in good
faith to negotiate a settlement of such dispute.
In the event that the execution of the Employment Agreement with
Sellers is not fully executed at or before Closing, Buyer at his sole election
may terminate this Agreement.
(b) Buyer's Remedy. In the event the Sellers are in default of any of
the provisions of this Agreement as of the Closing Date or thereafter, the
Buyer, shall be entitled to offset any damages caused thereby first against the
amount of the payment of the First Goodwill Payments, and then if such amount is
in excess of the amount of such First Goodwill Payment, then against the amount
of the Second Goodwill Payment, and then if such amount is in excess of the
amount of the First and Second Goodwill, then against the amount of the Purchase
Price, and if such amount is in excess of the Purchase Price, then Buyer shall
have a claim against the Sellers.
(c) The foregoing specific remedies shall be the only remedies of the
Parties pursuant to this Agreement and shall be in lieu of all claims of any
nature and kind, whether in law or in equity and in lieu of any claim based on
any legal theory including but not limited to remedies based on contract or tort
law and shall be in lieu of any claim for monetary damages whether actual or
special based on any claim for relief.
(d) Sole Remedy. The Parties hereby agree that the rights and remedies
set forth in this Section 12 shall constitute each Party's sole remedy against
each of the other Parties after the Closing for the breach of any
representation, warranty or covenant herein made by such other party.
(e) Seller's Remedy. In the event Sellers do not timely receive full
payment of the Purchase Price, Sellers shall be released from any non-compete
agreement contained herein, the Employment Agreements shall be null and void as
to any non-competition provisions therein and Sellers shall be entitled to
pursue such remedies against Buyer as are available in law or equity.
SECTION 13. MISCELLANEOUS.
(a) Litigation Support. If, and for so long as, any Party actively is
contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand in connection with:
(i) any transaction contemplated hereunder, or
(ii) any fact, situation, circumstance, status, condition,
activity, practice, plan, occurrence, event, incident, action, failure to act,
or transaction on or prior to the Closing Date involving the Business, the other
Party will cooperate with the contesting or defending Party and
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its counsel in the contest or defense, make available its personnel and provide
such testimony and access to its books and records as shall be necessary in
connection with the contest or defense, all at the sole cost and expense of the
contesting or defending Party.
(b) Press Releases and Announcements. No Party shall issue any press
release or public announcement relating to the subject matter of this Agreement
until after the Closing without the prior written approval of the other Party;
provided, however, that any Party may make any public disclosure in a filing
with the Securities and Exchange Commission or any state securities commission
that it believes in good faith is required by law or regulation (in which case
the disclosing Party will advise the other Party prior to making the
disclosure). The terms of this Section 13 (b) shall not prevent the Sellers from
communicating with the employees and lenders of TDL regarding the content of
this Agreement.
(c) No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the documents referred
to herein) constitutes the entire agreement between the Parties and supersedes
any prior understandings, agreements or representations by or between the
Parties, written or oral, that may have related in any way to the subject matter
hereof.
(e) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests or obligations hereunder without the prior written approval of
the Buyer and the Sellers. Notwithstanding the foregoing,
(i) the Buyer may assign its rights and obligations under this
Agreement for the benefit of their lenders, provided that Buyer shall
remain liable for their respective obligations set forth in this
Agreement as if such assignment had not occurred hereunder and
(ii) Buyer may assign its rights hereunder to a wholly-owned
subsidiary, parent, brother or sister entity of Buyer provided that
Buyer shall remain liable for their respective obligations set forth in
this Agreement as if such assignment had not occurred hereunder.
(f) Counterparts. This Agreement may be executed and delivered in one
or more counterparts, each of which shall be deemed an original, but all of
which together will constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not in any way affect the meaning or
interpretation of this Agreement.
(h) Notices. Any and all notices required or permitted hereunder shall
be deemed to be sent or delivered when personally delivered to the recipient or
when mailed by certified or registered mail with proper first class postage
affixed thereto to the Parties hereto, as follows:
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If to the Sellers, TDL (prior to Closing):
Xxxxxxx X Xxxxxxx
Xxxxxxx X. Xxxx
0000 X. Xxxxx Xx.
Xxxxxx, Xxxxxxxx 00000
With copies to:
Xxxxx Xxxxx
Xxxxx, Xxxxx and Xxxx
0000 Xxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 80
Phone: 303-861-
Facsimile: 303-861
E-Mail: xxxxxxx@xxx.xxx
If to the Buyer:
Xx. Xxxxxx X. Xxxxx, Chairman and CEO
IntelliReady, Inc.
0000 Xxxxx Xxxxx Xxxx Xxxx
Xxxxxxx, Xxxxxxxx
Phone: 000-000-0000
Facsimile: (000) 000-0000
Email: xxxxxxxx@xxxxxxxxxx.xxx
With a copy to:
Xxxxxx X. Xxxxx, Xx.
Smart & Associates
0000 Xxxxx Xxxxx, Xxxxx X
Xxxxxxxxxx, Xx. 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
E-Mail: xxxxxxxxxx@xxxxx-xxx.xxx
Any notice required to be made within a stated period of time shall be
considered timely mailed if deposited before midnight of the last day of the
stated period. Any Party may give any notice or other communication hereunder
using any other means (including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail or electronic mail), but no such notice,
request, demand, claim or other communication shall be deemed to have been duly
given unless and until it is actually received by the individual, or by a person
at the address of the individual, for whom it is intended. Any Party may change
the address to which notices, requests, demands, claims or other communications
hereunder are to be delivered by giving the other Party notice in the manner set
forth herein.
(i) Governing Law. This Agreement shall in all respects be governed by
and construed in accordance with the internal laws (and not the law of
conflicts) of the State of Colorado.
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(j) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Sellers. No waiver by any Party of any default, misrepresentation
or breach hereunder, whether intentional or not, shall be deemed to extend to
any prior or subsequent default, misrepresentation or breach hereunder or in any
way affect any rights arising by virtue of any prior or subsequent such
occurrence.
(k) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration or area of the term or provision, to delete specific words or phrases
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of time within which
the judgment may be appealed.
(l) Expenses. Each of the Parties will bear his or its own costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby.
(m) Construction. Time is of the essence of this Agreement. The
language used herein will be deemed to be the language chosen by the Parties to
express their mutual intent, and no rule of strict construction shall be applied
against any Party. Any reference to any federal, state, local or foreign statute
or law shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise.
(n) Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
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IN WITNESS WHEREOF, the Parties have hereunto set their hands and seals
as of the date first written above.
BUYER:
IntelliReady, Inc.
By:
---------------------------------
Xxxxxx X. Xxxxx, Chairman and CEO
[CORPORATE SEAL] Attest:
SELLERS:
-------------------------------------
Xxxxxxx X. Xxxxxxx
-------------------------------------
Xxxxxxx X. Xxxx
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